Highlights

January was the seventh consecutive month in which monthly average North Sea Brent crude oil prices decreased, reaching $48/barrel (bbl), the lowest since March 2009. The price decline reflects continued growth in U.S. tight oil production and strong global supply, amid weaker global oil demand growth, which contributed to rising global oil inventories. In January, estimated Organization for Economic Cooperation and Development (OECD) total commercial oil inventories reached their highest level since August 2010.

EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, with 2015 and 2016 annual average West Texas Intermediate (WTI) prices expected to be $3/bbl and $4/bbl, respectively, below Brent. This price outlook is unchanged from last month's forecast. The current values of futures and options contracts continue to suggest very high uncertainty in the price outlook (Market Prices and Uncertainty Report). WTI futures contracts for May 2015 delivery, traded during the five-day period ending February 5, averaged $52/bbl while implied volatility averaged 52%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in May 2015 at $33/bbl and $81/bbl, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $32/bbl and $108/bbl for prices in December 2015.

Total U.S. crude oil production averaged an estimated 9.2 million barrels per day (bbl/d) in January. Forecast total crude oil production averages 9.3 million bbl/d in 2015. Given EIA's price forecast, projected crude oil production averages 9.5 million bbl/d in 2016, close to the highest annual average level of production in U.S. history of 9.6 million bbl/d in 1970.

Driven largely by falling crude oil prices, U.S. weekly regular gasoline retail prices averaged $2.04/gallon (gal) on January 26, the lowest since April 6, 2009, before increasing to $2.19/gal on February 9. EIA expects U.S. regular gasoline retail prices, which averaged $3.36/gal in 2014, to average $2.33/gal in 2015. The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices. The projected regular gasoline retail price increases to an average of $2.73/gal in 2016.

Natural gas working inventories on January 30 totaled 2,428 Bcf, 468 Bcf (24%) above the level at the same time in 2014 and 29 Bcf (1%) below the previous five-year (2010-14) average. EIA expects the Henry Hub natural gas spot price to average $3.34/million British thermal units (MMBtu) this winter (2014-15) compared with $4.53/MMBtu last winter (2013-14), reflecting both lower-than-expected space heating demand and higher natural gas production this winter. EIA expects the Henry Hub natural gas spot price, which averaged $4.39/MMBtu in 2014, to average $3.05/MMBtu in 2015 and $3.47/MMBtu in 2016, $0.39/MMBtu lower for both years than in last month's STEO.